Maryland Tax Exemption for Military Retired Pay

In Maryland, military retired pay is generally taxable as part of your state income tax, but you can subtract a portion of it from your income before calculating your Maryland tax. The amount you can exclude depends on your age at the end of the tax year: ✨

• If you are under age 55, you may subtract up to $12,500 of military retirement income from your federal adjusted gross income (AGI) before determining Maryland taxable income.
• If you are age 55 or older, you may subtract up to $20,000 of your military retirement income from your federal AGI before figuring Maryland tax.

This subtraction applies to retirement income received as a result of military service and is claimed on your Maryland resident tax return as an income subtraction. Key points:

• This isn’t a full exemption — it’s a partial subtraction that reduces the income subject to Maryland tax.
• You must be a Maryland resident to claim the subtraction.
• The rules generally apply regardless of whether retirement pay comes from active duty, reserves, or National Guard service.

Because state laws can change, you might also check for recent or proposed legislation that could adjust these amounts. If you want, I can explain how to claim this subtraction on your Maryland return (e.g., which line to use and the forms involved).